Global private equity major KKR has sealed its biggest deal yet in Asia. The US-headquartered firm, co-founded by American businessman and philanthropist Henry Kravis, has pumped in Rs 11,367 crore in Jio Platforms for a 2.32 percent stake.
This is the fifth global company to invest in Jio in the past five weeks. So far, has attracted a total investment of Rs 78,562 crore. Other investors in Jio Platforms include the likes of Facebook, Silver Lake, Vista Equity Partners and General Atlantic.
Moneycontrol caught up with KKR India's CEO Sanjay Nayar on the investment thesis behind the mega deal, potential synergies within the KKR global portfolio, digital buyout opportunities in India and much more.
Q: The Rs 11,367 crore Jio deal is KKR's biggest investment yet in Asia. What was the deal rationale that triggered this big move and made you join other big global tech investors that have recently invested in Jio?
A: I think from our perspective, the rationale is pretty simple. Firstly, we are backing the terrific entrepreneur vision of Mukesh Ambani. Combine that with the absolutely world-class execution they have shown to date. And in this vision and execution, a substantial amount of investment has already gone in. Reliance Jio has 400 mIllion subscribers and in their journey of connectivity, they have become dominant in their market share. You combine that with the emphasis they are putting on fibre and fibre to home. With this, add the infrastructure created they provide — digital apps, e-commerce services and enterprise services.
Secondly, imagine all of this being delivered to the Indian consumer at affordable pricing and the word affordable is quite critical. There is a lot of pent-up demand and we saw that when they made data available at an affordable price.
Thirdly, the digitisation drive of the government. India is such a huge country and if you look at just the penetration of smartphones and the internet, we have a long way to go. So I think the overall thesis which you make is world-class services available to consumers and small businesses at an affordable price. I think there is a lot of consumption that can come through, but all of this is not possible without fantastic execution and that's where we think Jio Platforms can do a lot to realise the overall vision.
Q: Reliance Jio is now positioning itself as not as a pure-play telecom player, but a digital and tech powerhouse. Do you think Jio could be India's potential answer to the famous FANG (Facebook, Amazon, Netflix and Google) stocks?
A: I don't know how to put acronyms around it. The telecom business is the base business and that itself is on its journey and they have done a really good job in the last four years. We have seen tremendous consolidation in the sector and Jio has 400 million subscribers already. I don't know what acronym you want to put on it but if you look at their digital applications, their whole vision of e-commerce and the ability to bundle all of this into the MyJio app and hook the customer probably sets them apart.
Q: KKR has invested more than $30 billion in 20 companies in telecom and tech segments. Do you see any synergies between the Jio investment and existing KKR portfolios companies like TikTok parent ByteDance and on-demand multi-service platform GoJek?
A: There are many ways to collaborate in the future. Our global tech team can collaborate with the India tech team. There will be partnerships through investments we have already made, including ByteDance, Gojek, and many others we have in the West. Remember, we are one of the few players in this group that have a tech franchise, private equity arm and also an India franchise. So, we should be able to help in many ways.
But it is too early to comment on which company. The broad answer is we do see the potential for partnerships and collaborations in the future.
Q: What are the specific areas of digital connectivity where you believe you can contribute to the Jio growth story and what is your take on Jio's role so far in the Digital India initiative?
A: It is a bit too early to say where exactly we can contribute as the deal is yet to close. But if you look at the entire IT and software spend in India, it is 0.2 percent of GDP as compared to the US, which is at around 1.1 percent of GDP. So, there's a huge opportunity in the B2B business. Even with internet penetration going up significantly, we are still behind western markets. Most importantly, Jio is a ubiquitous, high-quality, and affordable service.
Q: Will KKR look at further digital and tech investments in India?
A: For starters, our own portfolio companies have to adapt to the new environment. For instance, one of them, Euro Kids is beginning to tilt towards digital delivery. Digital education and digitised medical services are interesting pockets in this niche e-commerce segment but we have to think about our own companies first.
Read all KKR-Jio deal stories here(Disclaimer: Reliance Industries Ltd., which also owns Jio, is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd)